Apple and HTC reach a sudden patent peace, but at what cost?

The Taiwanese handset maker isn't looking good, in court or in the marketplace.

In a surprise weekend announcement, Apple and HTC report they have ended all their patent disputes. The financial terms are confidential, but HTC has been on the losing end of the legal action, so it's hard to believe the Taiwanese company didn't pay something to Apple. The new deal includes a 10-year license to current and future patents held by both companies.

The Apple-HTC battle has been going on since 2010, and it hasn't been going well at all for HTC. The company lost a case to Apple in late 2011 at the International Trade Commission, although it quickly worked around Apple's win on what it called a minor user-interface patent. HTC's own trade commission case against Apple phones failed. Despite those setbacks, less than three months ago, HTC was assuring reporters it intended to keep fighting Apple.

Assuming HTC is paying Apple something to make these lawsuits go away, it's on top of the reported $5 per Android phone royalty that HTC is already paying to Microsoft. To be sure, Apple had reasons to settle as well. Litigation is always a headache, and HTC is looking like a small-time competitor these days.

Ending its litigation against HTC isn't necessarily a sign Apple is ready to end its much larger crusade against Samsung. That company is the leading US smartphone seller and a major rival. But Apple has the edge in court right now, and it is likely to push that advantage. Apple is also sparring with Google-owned Motorola over patents.

When Apple first filed its lawsuit, HTC was somewhat patent-poor. It owned dozens of its own patents, compared to the thousands owned by Apple. HTC ultimately received patents from Google to keep up its patent fight against Apple, and also purchased a California company called S3 Graphics for $300 million (primarily to gain its patent portfolio). That didn't help matters much, either.

Apple's case against Samsung resulted in a $1 billion verdict for Apple this summer. Samsung is appealing that, while Apple tries to tack on additional damages and get Samsung products kicked off the market.

The CEOs both released short quotes about today's settlement.

“HTC is pleased to have resolved its dispute with Apple, so HTC can focus on innovation instead of litigation,” said Peter Chou, CEO of HTC.

“We are glad to have reached a settlement with HTC," said Apple CEO Tim Cook. "We will continue to stay laser focused on product innovation."

In addition to its courtroom setbacks, HTC isn't doing well financially. It recently reported a dramatic 79 percent downturn in year-over-year profits, and HTC stock is down about 80 percent from its high point in mid-2011. If HTC's decline continues, the lingering question may be this: did the once high-flying Taiwanese company shoot itself in the foot with poor business decisions, or was it the first victim of the smartphone patent wars?

A settlement indicates HTC has a new strategy and they're the second, after Nokia, to make peace w/Apple. Would really suck if they started executing better and then Samsung came after them with standards essential patents...

To be honest HTC didn't really rip off Apple's design. Actually most but a few of the Android manufacturers did not do so. But they are not successful as Samsung who now, together with Apple, eats most of the profits in the smartphone industry.

I really wish that these weaker players can all have licensing deals with Apple to end all the litigations and focus on innovation, so that it's not only a game of Apple vs Samsung. Samsung dominating the Android market is actually just different sides of the same coin. If these weaker Android manufacturers die out because of Samsung's domination, then we only have 2 choices: pro Apple or anti Apple. For anti-Apple guys there is only one "choice". This is not a healthy situation.

Hopefully the rumored Droid DNA with 1080p resolution helps them out financially. I know that some may disagree, but I have always loved my HTC devices. Good to see that they can move on to doing what they do well.

Good news for both involved. Legitimizes Apple's IP claims, and lets HTC move on. Wonder if Apple realized that MS is now making billions on Android royalties and decided a slice of the pie was worth it...

Whatever HTC has agreed to pay, it's consumers who will ultimately pay it.

The price of innovation, or the cost of monopolies on "inventions"? I can't see any innovation coming out of this, so must assume the latter. Governments need to change laws to stop this farce that is patent lawsuits.

Good news for both involved. Legitimizes Apple's IP claims, and lets HTC move on. Wonder if Apple realized that MS is now making billions on Android royalties and decided a slice of the pie was worth it...

Given that the deal is confidential, and we don't even know if a single dollar is changing hands it legitimizes nothing - neither legally nor morally.

At this point Apple and HTC have a clear common enemy, which is a company whose name starts with S. In fact, HTC has been taking such a beating from that company in the last couple of years that it is not much of a threat to Apple now. And apparently HTC does have some interesting patents.

I don't get it. Apple never licenses, they just go for outright bans. What changed?

Where did this bit of tech dogma come from? Apple has certainly licensed things. Probably the most famous Apple lawsuit before the Samsung one was ended with a cross licensing agreement with Microsoft back in 1997 (and before you say 'but first Apple went to court', they had filed the suit years before. Jobs pragmatically ended it when he returned).

Good news, I hope that HTC manage to capitalize on making superior devices. Barring a few software hiccups, their One series was the best piece of technology in its range on the market for several months after its release, yet it failed in generating enough revenue to help HTC grow. I can't help but wonder what the reasons were...

Whatever HTC has agreed to pay, it's consumers who will ultimately pay it.

You mean all the awesome smartphone designs with shitloads of innovative technology that HTC has been holding back for the past few years to release on December 20th 2012 (cause, well, the date is cool and all) will now not come to the stores?! Inconceivable!

HTC isn’t in trouble because of the lawsuits, or if they truly are, they have been "doing it wrong" for way, way too long.

I dislike Samsung for their business practices (and not just smartphone market ones) as much as anyone, but there is no denying that they have been executing their strategies—from research, CPUs, displays, manufacturing to marketing—very well. Apple’s iPhone kicked the smartphone market into high gear. Android allowed other smartphone manufacturers to catch up and keep pace, but only do so if they started executing as well as Apple does. It’s a hard lesson Microsoft, Nokia, et al had to learn and learn fast, and HTC’s troubles are as much a problem of Apple "patent wars" as Nokia’s troubles are.

I really wish that these weaker players can all have licensing deals with Apple to end all the litigations and focus on innovation, so that it's not only a game of Apple vs Samsung. Samsung dominating the Android market is actually just different sides of the same coin. If these weaker Android manufacturers die out because of Samsung's domination, then we only have 2 choices: pro Apple or anti Apple. For anti-Apple guys there is only one "choice". This is not a healthy situation.

I really have to roll my eyes at bullshit like this. First of all, there are more choices than just liking or hating Apple (or any company, technology, framework, ...). You can like phones from one ecosystem more than the ones from another without having to hate/love any of it. I wish all of you people who think like this would grow up already.

Second, there are plenty of competitors. There's feature phones, windows 7/8 phones and not to mention a bunch of other players in the android space (LG, Sony and Moto/Google come to mind). Yes, Samsung is the market leader but there's plenty of competitors to take up the slack if they mess up. They just happen to be executing very well.

The reason why HTC isn't doing well is 99.9% due to their poor business decision, namely their let's-charge-more-$$-than-competitors-and-do-not-update-the-OS-oh-and-release-125-handsets-an-year-because-we-are-a-premium-brand! "strategy".However much I dislike Apple's current tactic, I just cannot imagine that HTC doing much better than they do now even if Apple never sued. The man had shot himself in the head before Apple came along and poke him with a stick.

The reason for this settlement between Apple and HTC has very little to do with HTC's implementation of Android, which quite frankly, if that was the main reason for their dispute, Apple wouldn't have settled.

No, this settlement is about APPLE realizing it was facing a LOSING patent infringement battle against HTC and its LTE patents that could have lead to a sales injunction against all iPhone 5, iPad Mini and iPad 4 LTE models in the US.

The judge in the case had already cautioned Apple that he would have to be "overwhelmed with evidence" to grant their request to invalidate HTC's LTE patents. If he didn't invalidate those patents, it would basically be an air-tight case for HTC as Apple hadn't argued that they didn't use the technology covered by those patents (which is beyond dispute), only that HTC shouldn't have been awarded them.

It's not a surprise that the terms of the settlement were kept "confidential", but if they are ever released it will be revealed that it is APPLE paying HTC for licensing fees, not the other way around.

Unfortunately for Apple, they are involved in a similar case with Samsung in the EU with regards to infringements against Samsung's LTE patents in the iPhone 5, iPad Mini and iPad 4.

It's unlikely Samsung would agree to a settlement. Rather, it's more likely they'll play hardball and force a permanent sales injunction on those Apple products in the EU, which would land a crippling blow to Apple, ceasing revenue from their top three highest grossing products in their second most important market, and sending their AAPL share price into a spinning nose dive from which they may never recover.

No, this settlement is about APPLE realizing it was facing a LOSING patent infringement battle against HTC and its LTE patents that could have lead to a sales injunction against all iPhone 5, iPad Mini and iPad 4 LTE models in the US.

Funny you are the only one on the internet with this theory and you don't provide sources. And you just registered to say that.

No, this settlement is about APPLE realizing it was facing a LOSING patent infringement battle against HTC and its LTE patents that could have lead to a sales injunction against all iPhone 5, iPad Mini and iPad 4 LTE models in the US.

Funny you are the only one on the internet with this theory and you don't provide sources. And you just registered to say that.

The reason for this settlement between Apple and HTC has very little to do with HTC's implementation of Android, which quite frankly, if that was the main reason for their dispute, Apple wouldn't have settled.

No, this settlement is about APPLE realizing it was facing a LOSING patent infringement battle against HTC and its LTE patents that could have lead to a sales injunction against all iPhone 5, iPad Mini and iPad 4 LTE models in the US.

The judge in the case had already cautioned Apple that he would have to be "overwhelmed with evidence" to grant their request to invalidate HTC's LTE patents. If he didn't invalidate those patents, it would basically be an air-tight case for HTC as Apple hadn't argued that they didn't use the technology covered by those patents (which is beyond dispute), only that HTC shouldn't have been awarded them.

It's not a surprise that the terms of the settlement were kept "confidential", but if they are ever released it will be revealed that it is APPLE paying HTC for licensing fees, not the other way around.

Unfortunately for Apple, they are involved in a similar case with Samsung in the EU with regards to infringements against Samsung's LTE patents in the iPhone 5, iPad Mini and iPad 4.

It's unlikely Samsung would agree to a settlement. Rather, it's more likely they'll play hardball and force a permanent sales injunction on those Apple products in the EU, which would land a crippling blow to Apple, ceasing revenue from their top three highest grossing products in their second most important market, and sending their AAPL share price into a spinning nose dive from which they may never recover.

As excellent as such news would be for the consumer and the world in general I seriously don't see Apple ever being kept out of any markets. They simply have too much money and clout to throw around.

It sure would be nice to see them slapped down to a point where they had to grit their teeth and agree to cross licensing deals with everyone else in the market so that the world can get back to competing on merit instead of bogus design and software patents.

No, this settlement is about APPLE realizing it was facing a LOSING patent infringement battle against HTC and its LTE patents that could have lead to a sales injunction against all iPhone 5, iPad Mini and iPad 4 LTE models in the US.

Funny you are the only one on the internet with this theory and you don't provide sources. And you just registered to say that.

That's interesting and does put a different light on this settlement. Consider the downturns that Apple faced in the last few weeks:

1. Apple lost cases against Samsung in UK and the Netherlands2. U.S. Judge Tossed Apple Inc. Versus Google Inc Lawsuit Over Patents3. Apple lost a big patent case and was ordered to pay VirnetX $368.2m

This all, combined with decreasing tablet market share, management shuffles, and a stock that tumbled more than 20% to its 6-month lowest, may have weighed in towards Apple signing the current patent agreement. After all, the last thing that AAPL needs right now is yet another patent case loss from HTC.

No, this settlement is about APPLE realizing it was facing a LOSING patent infringement battle against HTC and its LTE patents that could have lead to a sales injunction against all iPhone 5, iPad Mini and iPad 4 LTE models in the US.

Funny you are the only one on the internet with this theory and you don't provide sources. And you just registered to say that.

That's interesting and does put a different light on this settlement. Consider the downturns that Apple faced in the last few weeks:

1. Apple lost cases against Samsung in UK and the Netherlands2. U.S. Judge Tossed Apple Inc. Versus Google Inc Lawsuit Over Patents3. Apple lost a big patent case and was ordered to pay VirnetX $368.2m

This all, combined with decreasing tablet market share, management shuffles, and a stock that tumbled more than 20% to its 6-month lowest, may have weighed in towards Apple signing the current patent agreement. After all, the last thing that AAPL needs right now is yet another patent case loss from HTC.

Yes, and also this week a District of Delaware court DENIED Apple's case dismissal request against MobileMedia Ideas, allowing them to pursue their lawsuit against Apple for infringing on its screen rotation patent.

This would be HUGE, of course, as "screen rotation" would cover every iOS device Apple has ever produced including all iPod Touch, iPhone and iPad models.

And Apple couldn't just simply remove "screen rotation" from iOS like how Samsung removed "rubber banding" from their devices so if Apple lost that case they would be liable for damages for every one of their iOS devices they ever produced as well as for future license fees.

MobileMedia Ideas, by the way, is a joint-venture between Sony, Nokia and MPEG LA, and it was Sony that originally filed for and was awarded these patents.

"The financial terms are confidential, but HTC has been on the losing end of the legal action, so it's hard to believe the Taiwanese company didn't pay something to Apple."

Companies pay other companies for patent licenses all of the time. HTC had no problem reaching agreement with Microsoft on patent licenses. All Android phone makers are paying Microsoft patent royalites. The difference with Apple is that it appeared to want to use its patents to exclude Android phone makers from the market. This settlement looks like a major Apple step towards sanity. That process will be confirmed if Apple works out settlements with Samsung and Google.

I suspect there's an agreement here that will result in some cross-licensing of technology and design. By cross-licensing I mean that Apple will probably have more access to HTC's toybox than vice versa but I actually think this could be interesting.

I suspect there's an agreement here that will result in some cross-licensing of technology and design. By cross-licensing I mean that Apple will probably have more access to HTC's toybox than vice versa but I actually think this could be interesting.

HTC really doesn't have much of a toybox. IIRC when first sued the were said to only have a few dozen patents total. First they tried to borrow some Google patents to counter-sue, but that failed. Then they bought a small pool of wireless patents. Apple has many times more patents than HTC.

If this is straight up cross license, then HTC really got the better end of the deal. But Apple gets a strategic win. Reducing how many fronts they are fighting the patent war on, and I suspect an Anti-Cloning clause to still protect their designs.

"Apple's agreement with HTC includes a 10-year license to current and future patents held by both companies"

So does that mean HTC can happily make any Android phone it likes now, with rounded rectangles and everything, without fear of Apple? Isn't that a huge advantage over other Android phone makers such as Samsung, whatever the result of any actual specific legal battles between Apple and Samsung?

I read it as HTC now has carte blanche to just get on with making phones.